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MSE Blog: The Government’s first-time buyer mortgage plan is flawed
Comments
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The red line measures the percentage of the average disposable income that a mortgage on a home costing the average amount.
True.So this includes everyone who bought their houses many years ago and who are now benefiting from the super-low interest rates should they be on a tracker
False.
The red line only measures mortgage payments as a percentage of disposable income for new purchasers. It does not include historical data.in real life, housing is now historically difficult to afford due to the large deposits being asked for, .
You won't see me arguing with that.
But it's mortgage rationing, not house prices, that are preventing the generation of today from buying.
House purchase costs as a percentage of income are at near historic lows, for the very lucky few that can get a mortgage.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
You're right, but quality of life is important to me. I have about four hours between getting home and going to bed as it is (15 mins bike ride from work at the moment); if I lost two hours on commuting, I'd find life a bit dedepressing. I have in the past had over an hours' commute each way, and hated it. I'd also have to pay higher travel expenses then, so the monthly outgoings wouldn't be that much lower.
As for SE/SO, have you read all the horror stories on these boards about people who have bought using them? I wouldn't touch them with a barge pole! I want to be mortgage-free within (a maximum) of 25 years after purchasing, and not stuck paying rent on a portion, and having all kinds of restrictions (not being allowed lodgers is a common one, and that would obstruct my game plan!).
I don't mind saving up for a few years, but I'm just saying that's how things are in parts of the country, as the article states. The only thing that would make things easier for me would be lower house prices, but I don't really think they've going to get much lower. That's just the way things are, and I'm willing to make some sacrifices in the short-term to achieve my goals.
I personally don't think 5% deposit mortgages are a good idea at any time, but especially in a falling/stagnant market. I also wouldn't want to buy a poor-quality new-build on a cramped estate. Maybe you think I'm being fussy not wanting SE/SO, or a new-build - I also wouldn't buy a flat. But there are plenty of cautionary tales to be read on MSE, and most users would advise against these things.
Still, I do think the housing stock needs to be increased, so that's one good thing that could come out of this scheme. I just wouldn't want to live in this stock myself.0 -
Indeed, but please realise that all of that is your choice, and it's not a case that you have no options.You're right, but quality of life is important to me. I have about four hours between getting home and going to bed as it is (15 mins bike ride from work at the moment); if I lost two hours on commuting, I'd find life a bit dedepressing. I have in the past had over an hours' commute each way, and hated it. I'd also have to pay higher travel expenses then, so the monthly outgoings wouldn't be that much lower.
I couldn't really care less about the horror stories of people on here, because for every one negative post there are 50 positive experiences that don't get posted. Shared Ownership and Shared Equity (to a lesser extent) can be wonderful ways for people to get on the property ladder who otherwise wouldn't be able to. I have advised on mortgages for these for many years, and have only come across a verysmall number of bad experiences.As for SE/SO, have you read all the horror stories on these boards about people who have bought using them? I wouldn't touch them with a barge pole!
Very good. That's another choice though, which is a self-imposed restriction, not something that the government, mortgage lenders or anyone else is putting upon you.I want to be mortgage-free within (a maximum) of 25 years after purchasing, and not stuck paying rent on a portion, and having all kinds of restrictions (not being allowed lodgers is a common one, and that would obstruct my game plan!).
The article makes out that there are no options. I am seeking to inform you that there are options, but you don't want to take them. That's not anyone else's fault.I don't mind saving up for a few years, but I'm just saying that's how things are in parts of the country, as the article states.
That's a good thing. But only in certain areas of your life, I see. That's all good, it's your life and your sacrifices to make. But it's disingenuous to come on here and say how you agree and that there is nothing that you can do when, in fact, there is plenty you can do but you're not willing to do it.The only thing that would make things easier for me would be lower house prices, but I don't really think they've going to get much lower. That's just the way things are, and I'm willing to make some sacrifices in the short-term to achieve my goals.
They have their place, in certain circumstances. Just like 120% mortgages had their place, in certain circumstances. But that's another debate entirely.I personally don't think 5% deposit mortgages are a good idea at any time, but especially in a falling/stagnant market.
Then don't buy a poor quality property. You seem to infer that all new build properties are of poor quality. I can assure you that it not the case, as New Build properties these days have to go through a lot more rigorous a checking procedure than at any time in the past and are guaranteed under NHBC and similar certifications.I also wouldn't want to buy a poor-quality new-build on a cramped estate.
People only post when they have something to complain about, in the main. Very few and far between are the posts on here to say "Just done xxx and it was fantastic, just wanted to let you know". If something goes well, you might tell a couple of people. If something goes badly you'll tell dozens. Human nature. Don't believe everything you read, especially on this forum.Maybe you think I'm being fussy not wanting SE/SO, or a new-build - I also wouldn't buy a flat. But there are plenty of cautionary tales to be read on MSE, and most users would advise against these things.
I'm sorry that you're so closed-minded to think that all new build properties are poor quality shoeboxes. Enjoy renting for years.Still, I do think the housing stock needs to be increased, so that's one good thing that could come out of this scheme. I just wouldn't want to live in this stock myself.I am an Independent Financial AdviserYou should note that this site doesn't check my status as an Independent Financial Adviser, so you need to take my word for it. This signature is here as I follow MSE's Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
The only thing that would make things easier for me would be lower house prices, but I don't really think they've going to get much lower. That's just the way things are,.
Just out of curiosity, if American style 25 year fixed rate mortgages were available here at similar rates to the states, ie, 4.5% for 25 years, would that not ease the situation for many, including yourself?
I note that has been one of the proposals raised recently by the govt.
As my generation were buying houses at 3.5 to 4 times income with a 5% deposit and 15% interest rates, the security of a long term fix would mean today's generation could buy houses at 5 or 6 times income with a 5% deposit but at sub 5% rates guaranteed for the term and still spend less than we did on servicing the mortgage as a percentage of income.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
As for SE/SO, have you read all the horror stories on these boards about people who have bought using them? I wouldn't touch them with a barge pole!
These boards by their very nature attract the tiny minority of people with problems looking for help. For 99% of people things work out just fine.
Assuming the typical experience of SO/SE is represented by the people who complain about them on the housing boards is like assuming the typical family is bankrupt and destitute after reading the bankruptcy or debt boards.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Hmm it would be nice if the author of that graph atHAMISH_MCTAVISH wrote: »
False.
The red line only measures mortgage payments as a percentage of disposable income for new purchasers. It does not include historical data.
...
http://www.ercouncil.org/chart_of_the_week.php?subaction=showfull&id=1315575428&archive&start_from&ucat=3&
would specify if their figures are across the board (that is, include current mortgage payers who bought in the past) or just apply to brand new mortgagees. I tend to favour the former assumption, until it's clarified.0 -
I tend to favour the former assumption, until it's clarified.
The data on the linked image is credited to Halifax.
Halifax produce an ongoing series of data on mortgage payments as a percentage of disposable income.
From their website:Mortgage to Earnings Ratio
The mortgage to earnings ratio is calculated using the Halifax standardised average house price (seasonally adjusted), average disposable earnings (calculated from average earnings for all full time employees (ASHE)) and the Bank of England monthly average rate for new advances to households.
New mortgages, not existing.
Also backed up here.....
http://www.ftadviser.com/2011/10/04/mortgages/property-is-at-its-most-affordable-in-years-halifax-2nE4pjVbnqW1AmyhCrOXvM/article.html;jsessionid=AFF97AF6DA61D2B843EC14F61CB4ADC1.mps-apr-01-8104The proportion of disposable income devoted to mortgage payments is at its most favourable for 12 years, according to new Halifax research.
Typical mortgage payments for a new borrower stood stood at 28 per cent of disposable income income after tax and national insurance in the second quarter of 2011.
All 12 regions have experienced the improvement in affordability since mid-2007, with affordability better than the long-term average in all regions.
As I've said, buying a house is currently more affordable than at most points in history.
However mortgage rationing is ensuring the majority will not have the chance to take advantage of such low house buying costs.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »As I've said, buying a house is currently more affordable than at most points in history.
However mortgage rationing is ensuring the majority will not have the chance to take advantage of such low house buying costs.
Really, house prices are still extremely inflated. If you are saying emergency low interest rates and too high house prices are a good reason to buy then you are clearly mistaken.
1st why would anyone buy if house prices are too high but can be seen falling each month. Surely they would wait till properties became more affordable.
2nd Mortgage rates are becoming more detached from BOE rates and closer to LIBOR which is going up and will increasingly go up as the European problems increase.:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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If house prices were "extremely inflated", there would be zero purchasing going on. As there IS purchasing going on, your first line is flawed. As for "Emergency" low interest rates, well, is you want to call them emergency rates it's been a hell of a long emergency.
1st - people buy because they want to and they consider that what they are paying is appropriate value for what they are getting. They take responsibility, and don't need you to tell them whether something is good value or not. People are grown-ups.
2nd - Mortgage rates have always been detached from BoE rates. The Bank of England Base Rate has nothing to do with how lenders set their interest rates and it never has done.I am an Independent Financial AdviserYou should note that this site doesn't check my status as an Independent Financial Adviser, so you need to take my word for it. This signature is here as I follow MSE's Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
The Times this morning has seen the light!
See my post My Post 65 in another MSE house prices thread about today's Times article "Who is stopping house prices falling?"
the article has its own take on why these first time buyer schemes exist0
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